HYBRIDS: Repsol: Perp Final

Elements of safe haven demand have been evident through the day, even with global equity futures & AUD/USD off Friday’s late lows that stemmed from the escalation in the China-US trade war.

• Bund futures have pierced Friday’s high and gold has registered a fresh all-time high, even as stocks recovered from their Friday lows after Trump moderated his tone towards China
• The broader USD (BBDXY) is firmer, probably owing to the fact that the latest trade dispute stems from China’s actions surrounding rare earths, which impacts global buyers of those products. Meanwhile, the US reaction is naturally limited to China, given the nature of the dispute.
• The market may be viewing this as a less isolationist trade policy when compared to the broader tariff regime of Trump’s second term (prior instances weakened the USD), with the potential for western partners to band behind Trump if the rare earths matter sees further escalation.
• Broader gold and fixed income demand is probably linked to hedging against such risks as well.

• RES 4: 114-10   High Apr 7 (cont.)
• RES 3: 114-00   Round number resistance
• RES 2: 113-12/29 High Sep 18 / High Sep 11 and the bull trigger 
• RES 1: 113-09   High Oct 10 
• PRICE:‌‌ 113-02 @ 14:23 BST Oct 13
• SUP 1: 112-14/01 50-day EMA / 50.0% of Jul 15 - Sep 11 upleg   
• SUP 2: 111-26   Low Aug 26
• SUP 3: 111-13+ Low Aug 18 and a key support  
• SUP 4: 111-01+ 76.4% retracement of the Jul 15 - Sep 11 bull phase  

Treasury prices rallied sharply on Friday resulting in a breach of resistance at the 113-00 handle.The break signals scope for a test of 113-12, the Sep 18 high, where a breach would expose 113-29, the Sep 11 high and a bull trigger. On the downside, support at the 50-day EMA at 112-14 remains intact for now. A clear break of the average would expose 111-13+, the Aug 18 low and a key support.

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